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Republican lawmakers on Monday were circulating a bill that would replace Wisconsin’s independent Legislative Audit Bureau, saying inspectors within state agencies could prevent problems before they occur.

Democratic leaders pounced on the proposal, pointing out that it comes on the heels of a highly critical audit bureau report on lax controls on tax dollars distributed to businesses by Republican Gov. Scott Walker’s economic development agency.

A recent State Journal investigation revealed that top Walker aides pressed the Wisconsin Economic Development Corp. for an unsecured loan to a Walker campaign donor that cost the state half a million dollars without creating jobs. In another case, WEDC gave $686,000 to a company that promised to manufacture a jet-powered helicopter even though it had no experience building aircraft, the newspaper found.

Under the bill, the audit bureau would be replaced by a system of inspectors general working within state agencies. The proposal’s lead author, Rep. David Craig of Big Bend, wasn’t available to discuss his assertion that the inspectors would be better at getting ahead of problems.

“In a session filled with bad ideas, this is one of the worst in terms of adversely affecting the taxpayers’ long-term interest,” said Assembly Minority Leader Peter Barca, D-Kenosha.

The existing audit bureau is a free-standing watchdog office that operates independently of the agencies whose finances and practices it reviews. The bureau makes public recommendations for improvements under the oversight of the bipartisan Legislative Audit Committee.

The proposal to replace the audit bureau was circulated in an email sent Monday to other lawmakers by Craig and Rep. Adam Jarchow, R-Balsam Lake. They said the bureau does a “tremendous” job, but it fails to prevent problems.

“Unfortunately, the statutory process under which the LAB operates focuses more on retrospective examination rather than proactive fiscal action and bad practice (deterrence). In many instances, by the time an audit has occurred the political will (or new legislative composition) necessary to change a state program has diminished,” Jarchow and Craig said in the email.

Under the proposal, inspectors general would report agency “waste, fraud and abuse” to the state Department of Justice and the leaders of Legislative committees that oversee the agency under review, and Legislative leaders could agree to authorize further audits of any program, the email said. In addition, lawmakers could order state inspector general audits of “any county, city, village, town or school district.”

The Joint Committee on Legislative Organization would appoint all inspectors general for six-year terms and the inspector general office would have all powers of the current Legislative Audit Bureau, according to analysis by the Legislative Reference Bureau.

Under current law, the legislative organization committee appoints just the state auditor, who then hires bureau staff. The law requires that state auditors have specific training and experience in auditing and management. The state auditor has authority to access state records without notice, to subpoena witnesses, and take testimony under oath.

Barca said the proposal would be a blow to open government while inviting more partisan and special interest influence.

“One of the greatest strengths of the Wisconsin Legislature is having nonpartisan service agencies like the Audit Bureau, Fiscal Bureau and Reference Bureau,” Barca said in a statement. “Through these agencies, citizens can be assured they are getting the pure facts and that the information released is not being clouded by partisan judgment or political spin.”

The proposal includes a provision that would require anyone challenging a state agency decision to seek review by an inspector general before using another avenue, such as a contested case hearing in which an administrative judge rules. Environmental groups use the hearings to contest state Department of Natural Resources pollution permits they believe provide inadequate protections to air and water quality.

A spokesman for Jarchow said only Craig would answer questions about the bill. Craig didn’t respond to emails and phone calls.

Spokeswomen for Senate Majority Leader Scott Fitzgerald and Assembly Speaker Robin Vos said they were reviewing the bill.

“The speaker’s office was not involved in drafting the legislation’” said Vos spokeswoman Kit Beyer.

Fitzgerald’s spokeswoman, Myranda Tanck, said he received a copy of the proposal Monday morning. A spokeswoman for Walker didn’t respond to a request for comment.

Last month, the audit bureau released its report on the Wisconsin Economic Development Corp., Walker’s flagship job creation agency.

The bureau found that WEDC did not accurately disclose the numbers of jobs created by its programs and didn’t require grant and loan recipients to submit information showing that jobs were actually created or retained.

The review of 100 financial assistance awards to businesses found WEDC failed to follow state laws, didn’t ensure that aid recipients were qualified and neglected to properly keep tabs on how the money is used or whether loans were repaid.

The audit bureau was created by law in 1965. Before that, a department under the direction of the governor’s office performed financial audits.

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Steven Verburg is a reporter for the Wisconsin State Journal covering state politics with a focus on science and the environment as well as military and veterans issues.